What are the different types of current account ?

Before we compare current accounts, let's clear up what the different types of bank account mean:

Basic - Very simple bank accounts that typically don't offer a debit card, overdraft, cheque book or in-credit interest. Often used by customers with a poor credit score, or recent arrivals to the UK. Also available as bad-credit, or prepaid, accounts.

Standard - The most common bank account, offering an overdraft, debit card and cheque book. You may have to pay a minimum in each month to access certain accounts.

Packaged - Typically demand an annual or monthly fee but in return will offer free perks on top of the usual banking facilities, such as breakdown cover or mobile phone insurance. Before signing up, make sure you are eligible for any policies that come included; and, of course, check you couldn't get them cheaper elsewhere!

High-interest - Some accounts offer a hefty interest rate, but whether you can get a high-interest account will depend on your balance and monthly in-payments.

Cashback - Accounts that will give you cash for paying in a fixed amount each month, or for paying household bills from the account.

Student - Unsurprisingly targeted at customers in higher education, with features such as interest-free overdrafts.

Graduate - Designed to help students make that financial transition after graduation. Offer introductory deals, often for three years, such as 0% overdraft fees and no account fees for everyday banking.

How do I choose the best current account for me ?

Sifting through these options and finding the best current account for you can be difficult.

It largely depends what you want from your bank account. From interest rates to customer service, banks and building societies' offerings vary hugely.

Whilst cashback (more on this later) is a great perk, the most important factor in choosing a current account is how you use it.

Are you usually in credit with a large balance of over £1,000? Think about a deal that pays a good rate of interest (at the moment, interest rates are rock bottom, which is all the more reason to shop around).

Or are you usually overdrawn? Look out for banks with the best overdraft rates, or accounts that won't charge for a certain period if you do go into the red.

If you're tech-savvy, a highly-rated online banking app that gives you control over your money might be a deal-clincher.

Or you might value face-to-face banking, in which case an account with a heavy app focus might not be for you.

IS YOUR CURRENT ACCOUNT RIGHT FOR YOU?

What is an overdraft?

An overdraft is what you go into if your balance goes into negative values. It essentially means you're borrowing money from your bank.

Authorised overdrafts are ones that have been agreed with your bank, allowing you to fall into a negative balance - usually between £500 and £2,000. An interest rate or daily fee will typically still apply.

An unauthorised overdraft is bad news. It's where you spend more money than you have put in without agreeing it first with your bank. Falling into an unauthorised overdraft will mean you have to pay fees and a high rate of interest or daily fee.

Some banks do offer ‘interest free overdrafts' but this is not the same as your overdraft limit. You will usually only be able to borrow interest free on a fixed amount that's smaller than your overall cap.

What is AER ? Interest rates explained

The Annual Equivalent Rate is the variable interest rate when you're account is in credit. It tells you how much money in interest you will gain at the end of the year.

Your bank will work it out based on the assumption that any interest paid is combined with the original balance. The next interest payment will be based on the slightly higher account balance.

How do you switch bank accounts ?

To switch bank accounts, you'll need your passport or driver's licence, as well as proof of address (normally at least two bills with your address and name).

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